Agricultural Input Subsidy Programs in Africa:

Transcription

1 Agricultural Input Subsidy Programs in Africa: A Review of Recent Evidence T.S. Jayne, Nicole Mason, William Burke, Joshua Ariga Guest lecture, Princeton University, Tim Searchinger Sustainable Food Systems Course November 13,

2 Objectives: 1. To review recent evidence on the impacts of input subsidy programs (ISPs) in Africa 2. To identify government actions that will increase the benefits of ISPs Directly -- through ISP program design Indirectly through actions that enable farmers to use fertilizer more efficiently 2

3 Expenditures of Input Subsidy Programs Country Annual Program Cost (USD million) % of Ag Budget Malawi 152 to to 71% Tanzania 92 to to 46% 3 Zambia 180 to to 59% Senegal 36 to to 31% Ghana 112 to to 54% Nigeria 167 to 800 (?) 26 to 78% Kenya 61 to 89 9 to 26%

4 Part I: Summary of Evidence 4

5 Summary of evidence: Conclusion #1: Clear short-term contribution to food production

6 Summary of evidence: Conclusion #2: Highly variable achievement of targeting criteria

7 Attributes of Households Acquiring FSP Subsidized Fertiliser - Zambia Value of HH Assets (ZMK) Volume of Fertliser Aquired Value HH Assets Fert Quantity Acquired 0 1st Q (Low) 2nd Q 3rd Q 4th Q 5th Q (High) Quintitles of HH Per Capita Land Use (Cultivated + Fallow) 0 7

8 Diversion of fertilizer from FISP, Zambia Farmer claims FSP/FISP distribution Planting year Metric Tons ,722 48,000 33% ,372 60, ,792 50, ,595 50, ,404 84, ,596 50, ,114 80, , , , ,000 63% , ,000 8 Source: Mason, 2011

9 Summary of evidence: Conclusion #3: Subsidy fertilizer partially crowds out commercial sales: For every 1000kg of fertilizer distributed through ISPs, national fertilizer use rose only between 400 to 700kg (Zambia, Malawi, Kenya) In two cases, Nigeria and areas of Zambia where private firms did not operate, evidence of crowding in

10 Summary of evidence: Conclusion #4: Positive effects on hh incomes in year that subsidy is received No significant increase in hh income in year after subsidy ends

11 Summary of evidence: Conclusion #5: Little effect on food price levels Malawi Zambia Nigeria

12 Ranking of Alternative Investments: Meta-Study Evidence from Asia and Africa Policies Infrastructure investment Agricultural R&D Agricultural extension services Credit subsidies Fertilizer subsidies Irrigation The Economist IFPRI study

13 Ranking with respect to agricultural growth: Evidence from Asia The Economist Policies 1 IFPRI Infrastructure investment 3 1 Agricultural R&D 2 2 Agricultural extension services 5 Credit subsidies 7 3 Fertilizer subsidies 6 4 Irrigation 4 5

14 Ranking with respect to poverty reduction: Evidence from Asia The Economist IFPRI Policies 1 Infrastructure investment 2 1 Agricultural R&D 3 2 Agricultural extension services 4 3 Credit subsidies 7 4 Fertilizer subsidies 5 6 Irrigation 5 5

15 Summary of evidence: 1. Significant short-term effect on food production 2. Highly variable achievement of targeting criteria 3. Crowding out -- a problem 4. Small / transitory effects on hh incomes 5. Little effect on food prices

16 Part II: What to do? 16

17 Proposals for raising the benefits of ISPs 17

18 Zambia s flexible e-voucher ISP Government pilot program in 13 of 108 districts in 2015/16; expanding to 39 districts in 2016/17 Uses pre-paid Visa card; agro-dealers must have point of sale machines E-voucher value (Ksh): Farmer contribution 40 Government contribution 170 TOTAL 210 Eligible inputs: Various fertilizers, seeds (any crop), crop protectants and sprayers, lime, livestock feed/drugs/dip chemicals, fish fingerlings 18

19 Intended benefits of Zambia s e-voucher vs. its traditional ISP 1. Give farmers more choice; encourage agricultural diversification 2. Crowd-in the private sector (traditional ISP excluded agrodealers) 3. Cost-savings: shift some of the costs of the subsidy program to the private sector 4. Timely availability of inputs to farmers (gov t distribution system had been plagued by late delivery) 5. More transparency (gov t distribution opaque, massive diversion and other rent-seeking behavior) 19

20 Lessons learned from Zambia s 2015/16 e-voucher pilot A rigorous impact evaluation is still pending but preliminary findings suggest that the e-voucher: 1. Crowded in private sector participation in input distribution (e.g., more competition among agro-dealers; some even delivered inputs to villages from market towns à better access to inputs for farmers) 2. May have encouraged agrodealers to stock a wider variety of inputs (i.e., beyond maize seed and fertilizer), potentially leading to greater agric. diversification 20

21 Diversion of fertilizer from FISP, Zambia Farmer claims FSP/FISP distribution Planting year Metric Tons ,722 48,000 33% ,372 60, ,792 50, ,595 50, ,404 84, ,596 50, ,114 80, , , , ,000 63% , , Source: Mason, 2011

22 Other government actions to raise benefits of ISPs 22

23 I. Public investments to raise 23 crop response to fertilizer

24 Demand and profitability of using fertilizer VCR Farm-gate commodity price = Po * ΔQ Pf ΔF Farm-gate fertiliser price Crop response rate

25 Review of maize-fertilizer response rates on farmer-managed fields Study country Agronomic response rate (kgs maize per kg N) Morris et al (2007) W/E/S Africa Sheahan et al (2013) Kenya Marenya and Barrett (2009) Kenya 17.6 Liverpool-Tasie (2015) Nigeria 8.0 Burke (2012) Zambia 9.6 Snapp et al (2013) Malawi 7.1 to 11.0 Holden and Lunduka (2011) Malawi 11.3 Minten et al (2013) Ethiopia 11.7 Pan and Christiaensen (2012) Tanzania Mather et al (2015) Tanzania 5.7 to 7.8

26 Soil and land degradation a huge concern ØMajor conclusion of Montpellier Panel report Ø Extent of already damaged land: Ø65% of arable land Ø30% of grazing land Ø20% of forests ØBurden disproportionately carried by smallholders 26

27 Factors depressing NUE of inorganic fertilizer use: 1. Low soil organic matter significant decline in SOM over past 20 years in many countries (Mpeketula and Snapp) 27

28 Estimated marginal value product of nitrogen fertilizer conditional on plot soil carbon content Ksh/kg N Plot carbon content (%) 28 Source: Marenya & Barrett 2009

29 Factors depressing NUE of inorganic fertilizer use: 1. Low soil organic matter significant decline in SOM over past 20 years in Malawi (Mpeketula and Snapp) 2. Acidification 29

30 From Larson and Oldham, Mississippi State University Extension Service, Source: Burke,

31 Factors depressing NUE of inorganic fertilizer use: 1. Low soil organic matter significant decline in SOM over past 20 years in Malawi (Mpeketula and Snapp) 2. Acidification 3. Late delivery 31

32 Photo courtesy of Dingi Banda, Lusaka Province, Zambia 32

33 Elements of a holistic strategy: 1. R&D (national ag research systems) 2. Extension programs / soil testing 3. Programs to help farmers restore soil quality 4. Physical infrastructure 5. Reducing costs in input supply chains 6. More appropriate fertilizer use recommendations 33

34 Conclusions 34

35 Conclusions 1. ISPs are a powerful tool to quickly raise food production. 2. But if they account for too large a share of agricultural spending, they can crowd out other public investments required for sustainable development 3. Spending a large share of the ag budget on ISPs may not be the most effective way to promote the welfare of it citizens, but it is a highly demonstrable way to do so. 35

36 Conclusions 4. ISPs would be more effective if adequate resources were allocated to complementary public investments 5. More balanced public expenditure patterns could more effectively promote national policy objectives 6. There are concrete steps for improving ISP effectiveness related to governance and political commitment to target effectively and reduce diversion More holistic approach to sustainable intensification 36

37 Thank you Indaba Agricultural Policy Research Institute 37

38 Acknowledgements Nicole Mason, Bill Burke, Lilian Kirimi, Ayala Wineman, David Mather, Megan Sheahan, John Olwande, Jake Ricker-Gilbert, Auckland Kuteya, Antony Chapoto, Chinyama Lukama, and Vincent Malata 38